No need to. Inflation can be used to pay for radical market expansion (marketing) and further development.
There was a good discussion here https://bitsharestalk.org/index.php?topic=4713.0;all
Read the threads. Here are my thoughts:
The investor are always paying for the amount of salt they are buying. Even more precisely they are always paying for the amount of salt they expect to have when the time to sell the salt comes.
All is well and good. Maybe that is the best or only way to do things in a DAC.(highly doubtful)
First observation: The capital is highly unappreciated/de-incentivized in the system. Such people are considered more or less ‘freeloaders’, if they do not put extra work, in addition to providing money.
Let’s look at the things from the investor’s perspective. She basically has 2 choices:
-Risk her money early, for which she is usually rewarded with corresponding bigger returns (for the risks taken). Instead of that, she is burdened with at least 2.5 years of constant monitoring what the employees are doing – how much salt and how much water they add to the system.(fixing the max amount of water to be added, on a pre-determined schedule is another separate issue or (solution), but let’s not go there now)
- Or not-invest at that early stages (sell the shares that she got as dividend/distribution) at the beginning. Measuring the salt at discrete moments is always cheaper than constantly monitoring the system and trying to improve it to your likings. After 2.5 years when the guaranteed furious dilution of the shares of the DAC is sufficiently subsided, a new measurement can be taken and decision made on the appropriate action – buying back or staying put.
Making the usual assumption that all markets behave logically – when she tries to sell those shares she will find buyers offering not much above the max delusion expected/predetermined in the system. That is because they now are getting in the same boat our investors is trying to get out of.
Faced with those facts our investor have two new choice – sell at those prices (the better choice when better returns can be found in other investments), or holding for those 2.5 years without caring what the employees do. The risk of 2.5 years of adding nothing but water in the system is taken into account. Voting for ‘who is the faucet adding the water’ is highly de-incentivized, for all stockholders for which the constant monitoring the process is more expensive than the several ounces of salt they may or may not end up adding if they are more involved.[On a side note: I do not know if this is a desired or undesired consequence of the system design but this results also in encouraging/promoting big stake holders probably more than ‘active’ shareholders]
Aside for the voting effect mentioned above, it seems some believe do exists that the gradual delusion will lead to the prices of the newly issued shares somehow reflecting the current state of dilution as of this point, not the total max dilution build in the system. The previously described process explains why it is likely the prices to be much closer to the max dilution expected.
All the above worries me because it actually achieves nothing as a real economic benefit (compared to inflation-less) system, other than trying to incorporate much or less, some economic fallacies, such as: by increasing the supply of ‘money’ one can actually stimulate growth, and growing economic systems depend on constant increase in such supply.
Topic: The need for change (Read 7970 times)
